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Subject: pension plans

A retirement plan is an arrangement to provide people with an income during retirement when they are no longer earning a steady income from employment. Often retirement plans require both the employer and employee to contribute money to a fund during their employment in order to receive defined benefits upon retirement. Funding can be provided in other ways, such as from labor unions, government agencies, or self-funded schemes. Pension plans are therefore a form of “deferred compensation”. (Wikipedia Feb 2010)

US stock market

Baby Boomers’ retirement prospects

Boomers' retirement may be less than expected

A study by Daniel R. Ackerman, CPA, suggests that Baby Boomers who count on the long-term equity returns of 8% may be disappointed, either because returns are simply not justified, or because, if they are, the supply of equities from Boomers trying to exit the market during retirement will be so great as to depress stock prices.

Reliance on income-based investment, rather than capital gains, may be a more prudent strategy.

Victory for fund managers?

Pension law reform will alter capital flows

Aging populations alter capital flows

The Pension Protection Act of 2006 is a major piece of legislation that, like ERISA in the 1970s, will effect capital flows in the US market over the next generation.

Passage of the bill was helped along by heavy lobbying by the mutual fund industry trade organization, the Investment Company Institute.

Although considered favorable to fund managers, the long run impact is still uncertain.

Stock buybacks

Accelerating to a buyback-option blowout

Fuel on the Fire

By Q1 2006, stock repurchases by domestic non-financial corporations had multiplied to five times the level of 2000, the peak of the Great Bubble of the 1990s. With buybacks accelerating at an annual rate of 25% throughout 2005, and with net corporate profits after taxes increasing only 5.5% a year, it is now probable, if recent buyback-option trends persist, that by 2009 — the eve of retirement of the Baby Boomer generation — corporate stock buybacks will surpass net corporate profits after taxes.

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Featured articles on inside pages

Stock buybacks

Stock buybacks, refusing to die, live on

In Q1 2009, stock buybacks came back, driving up equity prices and sparking a rally by dominating a thin market. These equity repurchases were financed from depreciation and bond issues. More ...

Securities Analysis

Managing complexity

Modern capital markets have become so complex that security analysis methods of the 1930s are no longer adequate. Complexity goes beyond financial data to collateral issues such as operations, foreign and domestic taxation, and structural risks. More ...

US Politics

What is the future of private pension plans?

Between 1999 and 2002, US private pension funds lost US$ 1.2 trillion in value. It would almost seem that pension fund managers had been speculating with retirement money, attempting to beat each others' short-term performance statistics, with little interest in safeguarding the assets of plan beneficiaries. More ...

US equities

Stock values and cash dividends wither

Wall Street ballyhoo and flim-flam to the contrary, the year 2005 closed-out half a decade of misery and pain for the average investor in US equities. Average cash dividend yields never surpassed 3.8% during the period, and most of this was consumed by taxes and management expenses of the open-end mutual funds. More ...

US Bonds

Bond demand exceeds supply for a decade

Over the decade, 1995-2004, the demand for US bonds of all types has surpassed new bond issues in eight of the last ten years. This is the reason that bond prices have held firm, even in 2003, when net new issues reached almost $1.8 trillion. More ...

World Economy

Signs of US losing its groove?

Thirty years ago, US income from abroad was more than double the amount of income that the US paid to the rest of the world. This year, or the next, this foreign income surplus may disappear forever. Is the US 'losing its groove'? More ...

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2010-10-29 16:02